New ways to engage customers in co-designing your company's future - a weblog to complement the book, Outside Innovation, by Patty Seybold

Description

What is Outside Innovation?

It’s when customers lead the design of your business processes, products, services, and business models. It’s when customers roll up their sleeves to co-design their products and your business. It’s when customers attract other customers to build a vital customer-centric ecosystem around your products and services.
The good news is that customer-led innovation is one of the most predictably successful innovation processes.
The bad news is that many managers and executives don’t yet believe in it. Today, that’s their loss. Ultimately, it may be their downfall.

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LEAD USERS

Eric von Hippel coined the term "lead users" to describe a group of both customers and non-customers who are passionate about getting certain things accomplished. They may not know or care about the products or services you offer. But they do care about their project or need. Lead users have already explored innovative ways to get things done. They're usually willing to share their approaches with others.

LEAD CUSTOMERS

I use the term "lead customers" to describe the small percentage of your current customers who are truly innovative. These may not be your most vocal customers, your most profitable customers, or your largest customers. But they are the customers who care deeply about the way in which your products or services could help them achieve something they care about.

LEAD CUSTOMERS AND LEAD USERS

We’ve spent the last 25 years identifying, interviewing, selecting, and grouping customers together to participate in our Customer Scenario® Mapping sessions. Over the years, we’ve learned how to identify the people who will contribute the most to a customer co-design session. These are the same kinds of people you should be recruiting when you set out to harness customer-led innovation.

HOW DO YOU WIN IN INNOVATION?

You no longer win by having the smartest engineers and scientists; you win by having the smartest customers!

CUSTOMER CO-DESIGN

In more than 25 years of business strategy consulting, we’ve found that customer co-design is a woefully under-used capability.

Mobile app development is only one of many areas in which customer co-design shines. Ideally, you want customers to lead any new product or service innovation or re-design activity. But let’s get real. Embedding customers into your internal design and development processes is hard. It’s counter-cultural for most organizations.

It’s not safe! Fear of theft of assets, account information getting into the wrong hands, and identity theft.

B+

I can’t use it! Inability to pay everywhere I want to shop, using my payment type of choice.

D

You’re tracking me! Fear of “big brother” or any entity knowing where I am, what I’m doing, and making that information available to others without my knowledge or permission.

C

Lock-In! Once I start using a mobile e-wallet (assuming it’s safe to do so), how easily can I switch?

B

This week we take a deep dive into the entire ecosystem of partners required to support Apple Pay (or any mobile e-wallet). (See How Good Is Apple Pay's Ecosystem?) We ask the question: How well have the players in the Apple Pay ecosystem aligned to address these four customer-critical issues?

Apple Pay Is Optimized to Reduce Fraud and Support Banks. The Apple Pay ecosystem is optimized to address consumers’ concerns about credit card and identify theft as well as to eliminate some of the costs born by banks and other financial services providers in the ecosystem—the credit card issuers—by reducing the risk of fraud and the costs of fraud detection and prevention.

Optimizing around the risk of fraud and theft and catering to financial services providers is clearly a studied calculation that Apple’s design and management team made.

Merchants and Retailers Are Not the Design Center of the Apple Pay Ecosystem. If Apple had chosen instead to optimize around ubiquity of payment acceptance, they would have designed a solution that was easier for many more merchants to accept. Such a solution would need to make use of the current installed base of POS devices and provide more cost-effective and safer payment types. A merchant-optimized ecosystem (like MCX CurrentC, which was designed by retailers for retailers) would also enable each merchant to easily capture all the details of each consumer’s transactions and to easily integrate their own loyalty and rewards programs into the shopping and payment experience.

How Would the Apple Pay Ecosystem Look If It Were Truly a Customer Ecosystem?

7 Things the Apple Pay Ecosystem Needs to Change. What would be different if customer experience had really been the design center of the Apple Pay ecosystem? To become a customer ecosystem, Apple Pay should:

Work with both NFC (Near Field Communications) and non-NFC Point of Sale systems. Both kinds of transactions would require the same level of authentication (e.g., fingerprint and/or personal code).

Retain the tokenized approach to the payment transaction. Merchants do not need or want to see or to store consumers’ payment details.

Let consumers combine their brand-specific or retailer-specific loyalty cards with their payment transactions.

Give consumers control, on a brand-by-brand basis, over which retailers and brands are able to “know” their identity and associate their identity with their specific transactions.

Let consumers pay one another by transferring value securely from Apple Pay to individuals’ accounts (including people who do not use Apple Pay).

Notice that none of these customer-requirements would be that difficult for Apple and its ecosystem partners to address.

How the Apple Pay Ecosystem Is Likely to Evolve

Bear in mind that a healthy customer ecosystem will “automagically” begin to align to support and mitigate consumers’ top issues. In fact, you see signs of that happening already; now, only one week into actual operation in the U.S., a number of credit card companies, retailers, and banks are now hopping on board. That’s the first wave of response to consumer demand.

The second wave will be more difficult: Many merchants and retailers will continue to try to resist accepting Apple Pay until Apple supports non-credit and debit card transactions, taking the credit-card issuers (and their fees) out of every transaction. Yet Apple also solves a major problem for retailers: it will now be impossible for consumers’ credit card information to be stolen from their in-store point of sale systems and retail systems, because, with Apple Pay, retailers won’t ever have possession of consumers’ credit card information.

Retailers may be underestimating the importance of that peace of mind for their consumers. We predict that many consumers will buy and use Apple iPhones to pay at their stores specifically to increase their security and peace of mind.

Customers Will Reshape the Ecosystem to Meet Their Needs

We predict that customers voting with their feet and their tweets and their wallets will begin to reshape the Apple Pay ecosystem to better address their critical needs. It will be interesting to compare the Apple Pay ecosystem in one to two years to the Apple Pay system at its launch. Stay tuned.

How Good Is Apple Pay’s Ecosystem?How Well Does Apple Pay’s Ecosystem Meet Consumers’ and Partners’ Critical Needs? By Patricia B. Seybold, CEO and Sr. Consultant, October 31, 2014

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October 02, 2014

PayPal will be spun out of eBay in 2015. That’s welcome news for those of us who follow the mobile e-wallet space. Despite its strong presence as a payment service provider, PayPal’s strategy has been hindered by its relationship with eBay. An independent PayPal will be able to move more quickly and to partner with players that eBay might not be comfortable with.

Jay Yarow at Business Insider provides useful context in his post, entitled “PayPal No Longer Needs eBay.” Here’s a useful chart showing the shift in their relationship, courtesy of Business Insider:

Note that almost half of eBay’s $16 billion in revenues now come from PayPal. Yet, PayPal transactions account for a declining percentage of eBay’s total transactions. Jay Yarow writes:

“So, why is PayPal going solo now? There's a bunch of reasons — pressure from Icahn, pressure to hire people, competition with Apple, and other startups in the payment space. Being a standalone company makes recruiting easier. It also focuses PayPal on payments.

This chart gives another reason — PayPal doesn't need eBay anymore.”

~ Jay Yarow, Business Insider

Pundits have been arguing about why Apple did not include PayPal as an Apple Pay preferred provider and whether that loss precipitated the break up between eBay and PayPal.

“Apple and PayPal started talking early on in Apple’s development of Apple Pay, as Apple was setting up partnerships with the card-issuing banks and card networks. Since PayPal’s a payments industry leader, it would have been shortsighted for Apple to not reach out to PayPal.

But while these talks were going on, PayPal went ahead and partnered with Samsung on the Galaxy S5 fingerprint scanner, a move that was reportedly forced onto PayPal by eBay CEO John Donahoe. PayPal’s now-former president David Marcus was purportedly categorically against the Samsung deal, knowing that it would jeopardize PayPal’s relationship with Apple. Donahoe won the day, however.

Apple was said to be absolutely furious that PayPal did the deal with Samsung, which led Apple to cut PayPal out of the Apple Pay process entirely. (One source said: “Apple kicked them out of the door.”) This dust up with Apple was a big reason that David Marcus ended up leaving PayPal for Facebook.

Bank Innovation has learned further information that PayPal wasn’t included in Apple Pay at the request of the card issuers and card networks. Sources within PayPal say that the card issuers and networks asked Apple Pay to not partner with PayPal — which Apple was happy to oblige…”

The CEO of the new PayPal will be Daniel Schulman, an executive recently recruited from American Express, who led that company’s mobile and online payment services strategy. John Donahoe will be stepping down and will be replaced as eBay’s CEO by Devin Wenig, who currently runs eBay’s Marketplace business.

August 09, 2014

If you haven’t heard of CaringBridge.org, you should know about it. Eventually you, or someone in your family, will be dealing with a major health issue. CaringBridge provides the support infrastructure to deal with one of the most important, highly emotional, and time-consuming activities that a care-giving family has to deal with: keeping everyone in the loop. Email and/or Facebook work, but they’re not ideal for keeping everyone informed about the latest updates on someone’s battle with cancer, or the prognosis of someone who has just been in a horrific accident.

There are probably newer, spiffier e-tools available. But CaringBridge has something none of the upstarts have: 17 years of experience helping families deal with their health journeys. One of the things that I have learned from working with true Pioneers, is that when you devote ten+ years to understanding and addressing a customer-critical activity—whether that customer’s activity is designing an energy-efficient mobile phone, or managing IT resources, or dealing with a family’s health crisis—your understanding and experience trump all challengers. You deeply understand what the customer’s context is, what they’re trying to accomplish and what’s important to them as they do it. You don’t get distracted by side journeys because you are grounded in solving a real problem for real people: helping them get something done as easily as possible.

July 24, 2014

As I mentioned last week, in my post, “Enterprise Customers Forged the Apple/IBM Ecosystem,” what tickled me about the exclusive worldwide partnership announced by IBM and Apple on 7/15/14 was that it was a great example of IBM’s running around in front of the customer parade. Enterprise customers—led by their CEOs, sales execs, and top-earning rainmakers—had already voted with their proverbial feet and adopted Apple iPads and iPhones as their devices of choice for getting work done on the go. That meant that their IT organizations had to adapt by accommodating Apple devices and apps, and they did. Soon, an entire ecosystem of third-party tools and services sprang up to help enterprise IT professionals manage iDevices, support them, develop apps for them, and deliver back-end enterprise data and applications securely to employees. Apple helped primarily by getting out of the way. That evolution began four years ago, shortly after the introduction of the iPad. Apple supported these activities with its iOS Developer Enterprise Program, which allowed corporations to develop apps for their own institutional use and not have to publish them in the Apple App Store.

Now, IBM has made a dramatic entrance into this ecosystem—with four offerings specifically targeted for their many enterprise accounts: IBM MobileFirst for iOS, IBM MobileFirst Platforms for iOS, AppleCare for Enterprise, and MobileFirst supply and management. The first two offerings are targeted for application developers and are iOS-specific instantiations of IBM’s MobileFirst offerings, which we described in IBM’s MobileFirst “Customer Cloud” Strategy, in late March. Essentially, this is a cloud-based development platform that is designed to help enterprise app developers develop, deploy, secure, and integrate corporate apps into their (IBM and other ERP) back-end systems and services. IBM has developed 100+ starter kit apps for over 10 vertical industries.

June 27, 2014

June 25, 2014 was historic for mobile phone users in the U.S. The U.S. Supreme Court ruled on the case Riley vs. California, that police may not search the “contents” of a cell phone of an arrested suspect without a search warrant. The ruling points out that a cell phone isn’t like a cigarette pack or a piece of paper found in an arrestee’s pocket. Nor is it akin to a glove compartment within easy reach of the driver of a car who has been arrested. The syllabus (headnote) of the decision states:

“Cell phones differ in both a quantitative and a qualitative sense from other objects that might be carried on an arrestee’s person. Notably, modern cell phones have an immense storage capacity. Before cell phones, a search of a person was limited by physical realities and generally constituted only a narrow intrusion on privacy. But cell phones can store millions of pages of text, thousands of pictures, or hundreds of videos. This has several interrelated privacy consequences. First, a cell phone collects in one place many distinct types of information that reveal much more in combination than any isolated record. Second, the phone’s capacity allows even just one type of information to convey far more than previously possible. Third, data on the phone can date back for years. In addition, an element of pervasiveness characterizes cell phones but not physical records. A decade ago officers might have occasionally stumbled across a highly personal item such as a diary, but today many of the more than 90% of American adults who own cell phones keep on their person a digital record of nearly every aspect of their lives.

I haven’t gotten my hands on the new Amazon Fire Phone yet, so I can’t really comment on its most dramatic feature: what Jeff Bezos refers to as “Dynamic Perspective” – the 3D effect of its unique user interface. But, without the benefit of first hand experience, I tend to agree with Sean Madden of Wired, whose excellent post, “Amazon’s Fire Phone May Be Too Magical for Its Own Good,” talks about the trade-off between magical and practical UI features. Sean points out that, while “magical” works for seldom-used features, it becomes annoying when applied to things you need to do all the time.

“The ideal balance is one that Apple, Samsung, and Google have all zeroed in on after much trial and error: confine the “magic” to occasional interactions and celebrated results, and get the obstacles out of the way for frequently used ones with clear goals.”

February 14, 2014

I don’t believe I’ve met Satya Nadella, Microsoft’s new CEO. But I do know Bill Gates, Steve Ballmer, and John Thompson (the chairman of the board). I like the new management team.

I’ve been disinterested in anything Microsoft does for almost a decade. Why? My clients—customer-centric, tech-savvy executives in both large and small companies—stopped caring about Microsoft. They used to care a lot. Now, what Microsoft does is largely irrelevant to their business and personal lives. Many of my clients still use PCs. But most have non-Windows phones, and they typically have non-MS tablets. They still use MS Office apps. But they don’t care what Microsoft does.

The “post-PC” strategy that Nadella has telegraphed finally piqued my interest. Of course Microsoft is going to focus on mobile phones and on the Cloud. What else would they do? The big danger I see ahead is for Microsoft to chart a predictable course. If they focus on evangelizing Windows Phones and Microsoft Azure, they’re toast! Nobody will care about Microsoft’s phone OS or about Microsoft Azure, Microsoft’s cloud computing alternative to Amazon AWS, IBM’s cloud, HP’s cloud, or Google Compute cloud.

January 03, 2014

To kick off the New Year, we offer you our best articles from last year. In fact, in order to make it easy for you to read these, we’ve removed the “paywall” for all of them for 30 days. We hope you’ll take a few minutes to sample those you haven’t noticed or had time to read during the last 12 months.

Every week we publish a new article. Each one takes hours of research, thought, and preparation. Which of these articles did anyone read? Of the visitors to the Customers.com website in 2013, the largest number of you landed on, lingered on, and/or downloaded these 5 of the 60 articles we published last year.

November 04, 2013

Ok, so the company is called Research in Motion—familiarly known as RIM. But most of us think of it as the company that makes Blackberries—the mobile phone that won the hearts and minds of busy people all over the world—people who are addicted to email. My husband is a great case in point. He owns a Blackberry, an Android, and an iPhone. All have all the same functionality. All can answer calls to any of his numbers. But the one he panics if he doesn’t have? The Blackberry. Why? Because he’s addicted to email—both watching it arrive and making sure he doesn’t miss anything (which you can do on any phone), but also composing thoughtful emails and replies. Like Winston Churchill, he works from bed many early mornings—answering correspondence and sending out marching orders and learning and thinking about world events. The rest of the day, I often find him sitting in front of his computer, but typing on his Blackberry, not the computer. As he points out, the combination of a 2-thumb keyboard and a trackball for precise positioning of the cursor are pre-requisites for a high volume mobile email consumer and creator.

I too am currently a Blackberry user. I’m not happy about the downhill trajectory of the brand and the company. I rely on my workhorse Blackberry because I conduct most of my business and personal correspondence via email. And try as I might, I have yet to find another mobile phone that comes close to Blackberry’s productivity.